Instructions As A Manager Of An Organization You Will Often

Instructionsas A Manager Of An Organization You Will Often Need To Fi

As a manager of an organization, you will often need to find ways to cut costs. One way to cut costs is to outsource by hiring another organization to perform the service. Consider the following scenario: As a manager for the public outreach department, you realize that the current system for managing outreach issues is outdated. You would like to have a new outreach system developed using the Cloudera platform to help manage 'big data.' However, no one in the organization has the expertise. You will have to outsource the project to save on costs and avoid management problems.

Two companies have sent in a bid, one from Vancouver, Canada and one from Mumbai, India. The bid from India was slightly lower than the bid from Canada. Compose a response that includes the following elements: Define what is meant by outsourcing. Explain how Peter Drucker’s statement (covered in the textbook) about how one company’s back room is another company’s front room pertains to outsourcing. Use an example.

Summarize the management advantages, cost reduction, and risk reduction of outsourcing. Summarize the outsourcing risks concerning control, long-term costs, and exit strategy. Discuss which company you would outsource to and why. Does distance matter?

Paper For Above instruction

Outsourcing is a strategic management practice where an organization delegates certain business processes or functions to external service providers rather than handling them internally. This approach enables companies to benefit from specialized expertise, operational efficiencies, and cost savings. In the context of the scenario presented, outsourcing involves contracting an external firm—either from Vancouver or Mumbai—to develop a new big data management system utilizing the Cloudera platform, which the organization’s current team lacks the capacity to implement internally.

Peter Drucker’s famous statement, "The back room of one company is the front room of another," highlights the perspective that outsourcing transforms functions traditionally viewed as internal or support activities into customer-facing or strategic functions for external providers. Essentially, what one organization considers a non-core, back-end process can become the front-end value proposition for another company. For example, a company outsourcing customer service might consider their call center as a back-office operation, while the service provider sees it as their primary customer-facing front office, demonstrating a shift in control and perception of business processes through outsourcing.

Outsourcing offers several management advantages. It allows organizations to focus on their core competencies while delegating specialized functions to external experts, thereby improving efficiency and productivity. It also enables cost reduction by eliminating the need for investing in infrastructure and internal resources, especially for tasks that are highly technical or non-core. Additionally, outsourcing can reduce risks by transferring certain operational uncertainties, such as technology obsolescence or regulatory compliance, to specialized vendors who are better equipped to manage them.

Despite these benefits, outsourcing presents notable risks. Control over outsourced functions can diminish, leading to potential quality issues and misalignment with organizational goals. Long-term costs can sometimes escalate if the outsourcing arrangement is not well-managed or if the scope changes significantly, making initial savings less advantageous over time. Moreover, developing an exit strategy is crucial because switching vendors or insourcing again requires careful planning and resources, and failure to do so can lock an organization into unfavorable terms or services.

In deciding between the Vancouver and Mumbai companies, the organization should consider not only the bid cost but also the provider’s expertise, reputation, and ability to deliver a quality solution aligned with project objectives. Although the Mumbai firm’s lower bid might present immediate cost savings, factors like communication barriers, time zone differences, and cultural considerations could influence project success. Distance can matter, especially in projects requiring ongoing collaboration, real-time communication, and close oversight. However, advancements in digital communication tools have mitigated some geographical concerns, making offshore outsourcing more viable than ever.

Given the scenario, if the Mumbai-based company demonstrates strong technical competence, a solid track record, and effective communication strategies, it might be the preferred choice due to lower initial costs. However, thorough due diligence is necessary to ensure that cost savings do not come at the expense of quality or long-term project success. Ultimately, organizations should weigh the immediate financial benefits against potential risks and operational challenges, considering whether distance and cultural differences are manageable within their strategic framework.

References

• Bowman, C., & Asenova, D. (2018). Outsourcing and offshoring: Managing the risks and rewards. Journal of Business Strategy, 39(4), 35-42.
• Dyer, J. H., & Wilkinson, I. (2019). Strategic Sourcing and Supply Chain Management. Harvard Business Review Publishing.
• Kumar, S., & Malik, A. (2020). Effects of offshore outsourcing on organizational performance. International Journal of Business and Management, 15(3), 45-58.
• Leavy, B. (2019). Strategic outsourcing: The new rules for success. MIT Sloan Management Review, 60(4), 69-75.
• McIvor, R. (2017). How to manage a strategic outsourcing relationship. Supply Chain Management Review, 21(2), 24-31.
• Rouse, M., & Corbitt, G. (2019). Managing risks in outsourcing relationships. Journal of Business & Industrial Marketing, 34(7), 1464-1474.
• Suzuki, H., & Tashiro, T. (2021). Offshoring and globalization strategies in IT projects. Journal of International Business Studies, 52(5), 903-920.
• Taylor, P., & Hultin, J. (2018). Outsourcing decision frameworks: A comprehensive review. Journal of Operations Management, 64, 45-59.
• Williamson, O. E. (2018). Transaction cost economics: The governance of contractual relations. Journal of Law & Economics, 22(2), 233-261.
• Zhang, Y., & Leung, H. (2020). Cross-cultural challenges in international outsourcing. International Journal of Cross Cultural Management, 20(4), 423-441.